Travelling in Retirement: Budgeting for Your Second Big OE

Travel consistently ranks as one of the top retirement goals for New Zealanders. According to Sorted, many retirees plan to spend more in their early retirement years on experiences like travel before settling into a more modest lifestyle. But here's the thing: funding three months in Europe at 66 requires different planning than backpacking through Southeast Asia at 22.

You're not just budgeting for flights and accommodation anymore. You're considering travel insurance that actually covers your age bracket, the impact on your drawdown strategy, and whether that Mediterranean cruise fits within a retirement budget that needs to last potentially 30 years.

The good news? With proper planning, travel absolutely can be part of your retirement without compromising your long-term financial security. It just requires thinking about it differently than you did in your twenties.

The biggest mistake retirees make is treating travel as an "extra" rather than a core part of their retirement spending plan. If travel matters to you, it deserves a dedicated line in your budget from day one.

Start by thinking about your travel in phases. Many financial planners talk about the "go-go years" (typically 65-75), "slow-go years" (75-85), and "no-go years" (85+). Your travel budget will look different in each phase. That three-week hiking trip through Patagonia? Probably a go-go years adventure. A river cruise through Europe? Still very doable in your slow-go years.

Here's a practical framework: If you're planning to withdraw 4% of your retirement savings annually (a common starting point, though your personal rate may differ based on your circumstances), consider allocating 10-15% of that withdrawal to travel in your first decade of retirement. For someone with $500,000 in KiwiSaver and other savings, that's $20,000 per year in total withdrawals, with $2,000-3,000 earmarked for travel.

That might sound modest compared to your dreams, but remember: you're also receiving NZ Super. For a couple, that's approximately $43,000 per year after tax (2025 rates). Your travel budget is coming from both sources combined.

Let's talk about the expense that catches most retirees off guard: travel insurance. This isn't the $80 policy you bought online before that gap year. Travel insurance premiums increase significantly with age, and they come with conditions you need to understand before you book anything.

A 35-year-old might pay $150 for comprehensive cover for a month in Europe. That same policy for a 70-year-old could easily cost $500-800, and that's assuming you have no pre-existing medical conditions. Got high blood pressure, even if it's well-controlled? Diabetes? A heart condition? You'll need to declare these, and you may face higher premiums, specific exclusions, or in some cases, inability to get cover for certain conditions at all.

Here's what you need to know about travel insurance as an older traveller:

• Age limits vary by insurer - Some policies cap coverage at 70 or 75, others go to 85 or beyond, but premiums increase with each age band
• Pre-existing condition coverage is crucial - Always declare everything. Failure to do so can void your entire policy, not just claims related to that condition
• Medical evacuation coverage matters more - Getting sick in Rarotonga is different from getting sick in rural Mongolia. Ensure your policy covers medical evacuation, which can cost $100,000+
• Trip duration affects pricing - Ironically, longer trips can sometimes be more cost-effective per day than multiple short trips due to fixed policy costs
• Annual multi-trip policies may offer value - If you're planning several shorter trips, compare annual policies against single-trip coverage

Don't forget to check if your credit card offers any travel insurance benefits, though these typically have age limits and may not provide adequate coverage for retirees with health considerations.

Here's something interesting: retirement travel doesn't have to be more expensive than working-years travel. In fact, it can be cheaper if you're strategic about it.

You now have the ultimate luxury: time flexibility. You're not limited to school holidays or trying to cram everything into two weeks of annual leave. This opens up options that weren't available before:

Shoulder season travel: Visit Europe in May or September instead of July. You'll find cheaper flights, lower accommodation costs, fewer crowds, and often better weather than peak summer. The same Greek island that costs $250/night in August might be $120 in late September.

Slow travel: Instead of a two-week whirlwind through six countries, spend a month or two in one place. Rent an apartment in Portugal or Croatia for a month. You'll pay less per day than hotels, eat at local markets instead of tourist restaurants, and actually get to know a place. Many retirees find this style of travel more enjoyable and less exhausting anyway.

House-sitting and exchanges: Platforms like Trusted Housesitters connect travellers with homeowners who need someone to watch their property and pets. You get free accommodation; they get peace of mind. It's particularly popular with retirees and can dramatically reduce travel costs.

Cruises (done smartly): Yes, cruises can be expensive, but they can also offer good value when you factor in accommodation, meals, and transport between destinations all in one price. Book repositioning cruises (when ships move between seasonal routes) for significant discounts.

Travel with purpose: Volunteer tourism or educational travel programs can provide structure, community, and often reduced costs. Organizations like Worldpackers or WWOOF connect travellers with hosts worldwide.

There's solid logic behind doing your more ambitious travel earlier in retirement. That trekking trip to Nepal or wildlife safari in Tanzania? They're more enjoyable, and frankly more feasible, when you're 67 than when you're 82.

This is where the "go-go, slow-go, no-go" framework becomes really useful for planning. Your travel budget might look something like this:

Ages 65-75 (go-go years): Higher travel spending, more adventurous destinations, active trips. This might be when you allocate 15-20% of your discretionary retirement spending to travel.

Ages 75-85 (slow-go years): Moderate travel spending, more comfort-focused trips, perhaps cruises or guided tours rather than independent travel. Budget might decrease to 10% of discretionary spending.

Ages 85+ (no-go years): Minimal travel spending, local or domestic trips to visit family. You might redirect this money to other priorities like home care or support services.

This doesn't mean you stop travelling at 75, it just means you're realistic about how your travel style and budget will likely evolve. And here's the important bit: by front-loading some travel spending, you're not spending your future self's money. You're making conscious choices about when to use your resources for maximum enjoyment and capability.

However, don't make the mistake of blowing your entire travel budget in the first five years. Keep some powder dry for later trips, even if they're less ambitious. Your 80-year-old self might not be climbing Machu Picchu, but they might really enjoy a week at a beach resort in Fiji with the grandkids.

Here's a practical consideration many retirees overlook: where you draw travel money from can matter for tax purposes, particularly if you're still working part-time or have income-tested benefits or subsidies to consider.

If you're funding travel by withdrawing from KiwiSaver after 65, these withdrawals aren't taxed (you've already paid tax on the way in through PIE tax on returns). However, if you're drawing from other investments or selling shares, you may face tax implications depending on when you bought them and the circumstances of the sale.

For those with rental properties, consider whether selling a rental to fund several years of travel makes sense before or after certain tax thresholds. The bright-line test and your personal tax rate will influence this decision.

Timing also matters for those considering residential care subsidies later in life. While that might seem far off, the Residential Care Subsidy has asset testing rules, and how you spend down your assets in earlier retirement can impact eligibility years later. This is worth discussing with a financial adviser if substantial travel spending is part of your plan.

Rather than drawing ad-hoc amounts from your retirement savings whenever you want to travel, consider setting up a dedicated travel fund. This creates a psychological boundary that helps prevent travel spending from creeping into money earmarked for essential expenses.

Here's how it might work: Each year, transfer your allocated travel budget into a separate high-interest savings account. This becomes your travel fund for the next 12-24 months. If you don't use it all, it rolls over and gives you a bigger budget next year. If you overspend slightly one year, you know you need to scale back the following year.

This approach has several benefits. First, it makes your travel spending visible and accountable. Second, it prevents you from making impulsive decisions to book expensive trips without seeing the full financial picture. Third, it allows you to save up for a bigger trip over multiple years if needed.

Some retirees find it helpful to keep their travel fund in a different bank from their everyday accounts. Out of sight isn't quite out of mind, but it creates enough friction to ensure you're being intentional about travel spending rather than treating retirement savings as an unlimited travel slush fund.

After years of helping Kiwis plan for retirement, certain travel-related mistakes come up repeatedly:

Underestimating healthcare access abroad: NZ has reciprocal healthcare agreements with Australia and the UK, but these don't cover everything, and most countries require you to pay upfront and claim later. Always have comprehensive travel insurance and accessible funds for medical emergencies.

Not considering travel fatigue: Long-haul flights get harder as you age. That 24-hour journey to Europe you handled fine at 40 might be genuinely exhausting at 70. Factor in extra recovery time and consider breaking up long journeys with stopovers.

Booking non-refundable trips too far in advance: Health can change quickly as we age. While booking early often saves money, ensure you have adequate cancellation coverage or travel insurance that covers unforeseen health issues.

Neglecting to plan for emergencies while away: Who manages your affairs if something happens while you're overseas? Make sure someone at home has power of attorney and access to important documents. Consider estate planning basics before extended travel.

Comparing yourself to others: Social media makes it seem like everyone's doing six-month world tours in retirement. Your financial situation is unique. Travel within your means and enjoy it guilt-free, whether that's two weeks in Rarotonga or six months in Southeast Asia.

Here's what a realistic travel-inclusive retirement plan might look like for a couple who've saved $600,000 in KiwiSaver and other investments, own their home mortgage-free, and will receive NZ Super:

Annual retirement income:
NZ Super (couple): ~$43,000 after tax
Investment withdrawals (4% of $600,000): $24,000
Total: $67,000

Annual expenses:
Essential living costs: $35,000
Discretionary spending: $25,000
Travel fund: $5,000-7,000
Buffer/emergency fund contributions: $3,000

This gives them a meaningful travel budget without straining their overall plan. In their early retirement years, they might boost travel spending to $10,000 for a significant overseas trip, funded by reducing discretionary spending elsewhere or using accumulated travel fund savings from previous years.

The key is integration. Travel isn't separate from your retirement plan, it's part of it. When you include it from the start and build it into your drawdown strategy, you can travel with confidence instead of worry.

This article is general information only and does not constitute personalised financial advice. For advice tailored to your situation, speak with a licensed Financial Advice Provider. You can find a registered adviser at fma.govt.nz.